Competition Law: INFORMATION, UPDATES AND ANALYSIS, Sep 2016
EC fines truck producers 2.93 billion Euros for participating in cartel dated July 19, 2016
MAN Truck & Bus Deutschland GmbH (‘MAN’), AB Volvo (publ), Renault Trucks SAS, Daimler AG, Iveco Magirus AG and DAF Trucks Deutschland GmbH were discovered by the EC to be engaged in a cartel relating to:
- coordinating prices at “gross list” level for medium and heavy trucks in the European Economic Area (‘EEA’). The “gross list” price level relates to the factory price of trucks, as set by each manufacturer.
- the timing for the introduction of emission technologies for medium and heavy trucks to comply with the increasingly strict European emissions standards (from Euro III through to the currently applicable Euro VI).
- the passing on to customers of the costs for the emissions technologies required to comply with the increasingly strict European emissions standards (from Euro III through to the currently applicable Euro VI).
The investigation revealed the infringement to have lasted 14 years, from 1997 until 2011. It was discovered during the investigation that between 1997 and 2004, meetings were held at senior manager level of the infringing companies, sometimes at the margins of trade fairs or other events. This was complemented by phone conversations. From 2004 onwards, the cartel was organised via the truck producers’ German subsidiaries, with participants generally exchanging information electronically. Over the 14 years the discussions between the companies covered the same topics, namely the respective “gross list” price increases, timing for the introduction of new emissions technologies and the passing on to customers of the costs for the emissions technologies.
However, under the 2006 Leniency Notice, MAN received full immunity for revealing the existence of the cartel, thereby avoiding a fine of around €1.2 billion. For their cooperation with the investigation, Volvo/Renault, Daimler and Iveco were imposed a reduced fine under the 2006 Leniency Notice. The reductions reflect the timing of their cooperation and the extent to which the evidence they provided helped the EC to prove the existence of the cartel.
United States of America
Mylan Inc to divest rights in two generic drugs to settle FTC charges that its proposed acquisition of Meda would be anticompetitive dated July 26, 2016
Mylan Inc. has agreed to divest the rights and assets related to two generic pharmaceutical products: (a) 250 mg generic carisoprodol tablets which treat muscle spasms and stiffness and (b) 400 mg and 600 mg generic felbamate tablets which treat refractory epilepsy in order to settle FTC charges that its proposed $7.2 billion acquisition of Swedish drug maker Meda would be anticompetitive. Mylan Inc. and Meda are two of three companies currently offering 400 mg and 600 mg generic felbamate tablets, therefore without a remedy the consumers are likely to pay higher prices for the said drug. In terms of the proposed order U.S.-based generic pharmaceutical company Alvogen Pharma US, Inc. will acquire all of Mylan Inc.’s rights and assets related to 400 mg and 600 mg felbamate tablets. The proposed order also requires Mylan to provide transitional services and take all actions that are necessary for Alvogen Pharma US, Inc. to obtain FDA approval to manufacture and market 400 mg and 600 mg generic felbamate tablets. Further, presently the 250 mg generic carisoprodol tablets are marketed by Meda and one other company. Mylan Inc. which owns the U.S. marketing rights to a recently approved carisoprodol product, is the next likely entrant. Under the proposed order, Mylan must relinquish its U.S. marketing rights for the said drug. With the settlement, Indicus Pharma LLC, which owns the product, manufactures it, and markets it internationally, will compete independently in the U.S. market.
CMA fines Trod Ltd for entering into anti-competitive with GB Eye Ltd with respect to posters and frames sold on Amazon’s UK website dated August 12, 2016
Trod Ltd., a Birmingham based company has been fined by the CMA for entering into an agreement with one of its competing online sellers, GB Eye Limited, a Sheffield based company (trading as ‘GB Posters’), that they would not undercut each other’s prices for posters and frames sold by them on Amazon’s UK website. The companies are engaged in selling of licensed sport and entertainment merchandise and related products, including posters, frames, badges, stickers and mugs. The agreement was implemented by configuring an automated repricing software by each of the two parties. The illegal cartel applied to posters and frames sold by the companies on Amazon Marketplace via Amazon’s UK website from 24 March 2011 to 1 July 2015. Amazon Marketplace is an online retail platform that allows retailers to sell their products directly to end consumers via Amazon’s websites. GB eye Limited has not been fined as it reported the cartel and cooperated in the investigation.
Republic of India (comprising pronouncements on anti-competitive agreements, abuse of dominant position)
CCI imposes penalty on cement companies for cartelization Case No 29/2010 dated August 31, 2016
The investigation was instituted on an information filed by the Builders Association of India (‘BAI’) alleging cartelization in the cement industry against 10 cement companies and the Cement Manufacturers’ Association (‘CMA’). The final order has been passed by CCI pursuant to the directions issued by Competition Appellate Tribunal (COMPAT) remanding the matter back while setting aside the original order of CCI.
While imposing penalty, the CCI noted that the cement companies used the platform provided by CMA and shared details relating to prices, capacity utilisation, production and dispatch and thereby restricted production and supplies in the market, contravening the provisions of Section 3(1) read with Section 3(3)(b) of the Competition Act, 2002 (‘Act’). Further, CCI also found the cement companies to be acting in concert in fixing prices of cement in contravention of the provisions of Section 3(1) read with Section 3(3)(a) of the Act.
In addition to imposing penalty to the tune of INR 6,700 crores, the CCI directed the cement companies to cease and desist from indulging in any activity relating to agreement, understanding or arrangement on prices, production and supply of cement in the market. CMA has been further directed to disengage and disassociate itself from collecting wholesale and retail prices through member cement companies or otherwise. Also, CMA has been restrained from collecting and circulating the details relating to production and dispatch by cement companies. The present order is almost identical to the earlier order passed by the CCI in Case 29/2010 which was set aside and remanded back to the CCI for reconsideration by the COMPAT.
CCI dismisses complaint against Coal India Limited (CIL) Case No 40/2016 dated July 14, 2016
The allegations pertain to eligibility conditions specified in Global Tender Notice dated 09 February, 2016 invited by CSIR (Central Institute of Mining and Fuel Research), Dhanbad for hiring of technical service providers for providing scientific and technical services in collection, preparation and transportation of coal samples from loading sites located at various collieries belonging to the subsidiaries of Coal India Limited to CSIR-CIMFR Campus at Digwadih and its Research Centres at Nagpur, Bilaspur and Ranchi and similarly collection, preparation and transportation of coal samples from the unloading sites of power utilities to CSIR-CIMFR Campus at Digwadih and its Research Centres at Nagpur, Bilaspur and Ranchi which were alleged to be unfair.
The CCI noted that the plea of the Informant challenging the pre-qualification conditions that the bidder must have minimum business turnover of INR 20 crore per annum for last 3 years on the ground that it seeks to debar Indian firms, is misconceived as there are 26 third party samplers enlisted by CEA in concurrence with CIL. It was observed that the said list contains organisation such as Central Power Research Institute (CPRI), Central Mine Planning & Design Institute (CMPDI), Mineral Exploration Corporation Ltd (MECL). The CCI while dismissing the complaint further noted that stipulating strict terms while purchasing goods cannot be abusive as a consumer must be allowed to exercise its choice freely. It was also noted that the right of a consumer is sacrosanct in a market economy.
United States of America
FTC issues complaint against largest online retailer of contact lenses in the USA dated August 8, 2016
FTC has issued a complaint against 1-800 Contacts, the largest online seller of contact lenses in the United States alleging that it has executed a series of bilateral agreements with several online sellers of contact lenses which restrict the parties from competing against one another in certain online search advertising auctions. Major online search engine companies, Google and Bing, sell advertising space on their search engine results pages through computerized auctions. From 2004 onwards 1-800 Contacts entered into agreements with at least fourteen competing online sellers of contact sellers. These agreements unreasonably restrained both price competition in search advertising auctions and the availability of truthful, non-misleading advertising. Since 1-800 Contacts had engineered the bid allocation scheme some auctions were reserved for 1-800 Contacts alone. FTC has in its complaint stated that these agreements constitute an unfair method of competition and violate Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45
Republic of India
Gerdau S.A Sumitomo Corporation and The Japan Steel Works Ltd Combination Inquiry C-2016/06/412 dated 17 August, 2016
The proposed combination envisages setting up of a joint venture company in Brazil, which will primarily be engaged in the business of manufacturing and sale of Rolling Mill Rolls (‘RMR’), main shafts for wind turbines and rings for wind turbines.
Upon investigation, the CCI noted that while Gerdau S.A (‘Gerdau’) and Sumitomo Corporation (‘SC’) have insignificant presence in India, The Japan Steel Works Ltd (‘JSW’) does not have any presence either in RMRs or in business of main shafts for wind turbines. The CCI also observed that none of the Parties i.e. Gerdau, SC or JSW are engaged in the business of rings for bearings of wind turbines globally and in India. Thus, considering the current and potential state of operations, it was opined that the proposed combination is not likely to cause any appreciable adverse effect on competition in any of the possible relevant market that could be delineated. Therefore the exact delineation of the relevant market was left open. The combination was accordingly approved under Section 31(1) of the Competition Act, 2002.
United Kingdom (UK)
Phoenix Group Holdings/ AXA Sun Life Direct Limited and Winterthur Life UK Holdings Limited Merger Inquiry dated August 2, 2016
Phoenix Group Holdings (‘Phoenix’) through its wholly owned subsidiary, Pearl Life Holdings Limited, has agreed to acquire AXA Sun Life Direct Limited and Winterthur Life UK Holdings Limited (and some of its subsidiaries) which carry on the SunLife (‘SunLife’) and Embassy (‘Embassy’) businesses (the ‘Merger’). SunLife and Embassy are together referred as the ‘Target Businesses’. Phoenix and the Target Businesses are together referred to as the ‘Parties’. The CMA observed that the Parties overlap in the supply and management of different types of life insurance policy in the UK. The Merger was assessed by the CMA in reference to the supply and management of each of the following types of life insurance policy in the UK (many of which overlap): protection policies, pension policies (in particular, accumulation pension policies), investments and savings policies, ‘Guaranteed over 50s’ (‘GOF’) policies, non-profit policies, individual policies and group policies. On assessment of the horizontal unilateral effects in each of the frames of reference the CMA found that:
- the combined shares of supply of the Parties are below 10% in all the frames of reference mentioned above with the exception of the supply and management of GOF policies in the UK;
- post-Merger, Phoenix will continue to face sufficient competitive constraints in the supply and management of life insurance policies generally and in all types of life insurance policy mention hereinbefore, with the exception of GOF policies.
With respect to the supply and management of GOF policies in the UK, the CMA found on assessment that the Parties do not exert any material competitive constraint on each other because:
- Although SunLife is the largest supplier of GOF policies to new customers in the UK, Phoenix does not at present accept new customers and therefore does not impose a competitive constraint on SunLife;
- Other suppliers of GOF policies will continue to be an alternative to SunLife for new customers of GOF policies; and
- Existing Phoenix customers are unlikely to switch GOF providers because GOF policies do not typically carry a surrender value, and because premiums become higher with the age of the customer at the time of purchase.
The CMA was thus of the opinion that the Merger does not give rise to a realistic prospect of a substantial lessening of competition as a result of horizontal unilateral effects and therefore the Merger will not be referred under Section 33(1) of the Enterprise Act 2002.
Hammerson plc/ Grand Central Shopping Centre business Acquisition Inquiry dated July 28, 2016
Hammerson plc (‘Hammerson’) acquired the Grand Central Shopping Centre business (‘Grand Central’) (the ‘Merger’) on 12 February 2016. Hammerson and Grand Central are together referred to as the ‘Parties’. Hammerson is the owner of the Bullring shopping centre located in central Birmingham. Grand Central is a recently-developed shopping centre above Birmingham New Street train station in central Birmingham. Since the Parties overlap in the supply of retail space, the CMA assessed the impact of the Merger in the supply of retail space in the area known as the Birmingham Middle Ring Road (‘Birmingham City Centre’). On assessment the CMA found that although the retail space(s) offered by the Parties are competing to some extent they are differentiated in some important aspects (such as the size of the units offered) and are not considered as close alternatives by most retailers. The CMA further found that there will be sufficient competitive constrains post merger from several different retail space options available within the Birmingham City Centre such as ‘high street’ retail space offering. The CMA was thus of the opinion that the constraints taken together are sufficient to ensure that the Merger does not give rise to a realistic prospect of a substantial lessening of competition as a result of horizontal unilateral effects and therefore the Merger will not be referred under the Enterprise Act, 2002.
European Union (‘EU’)
EC opens in-depth investigation into proposed merger between Dow and DuPont dated August 11, 2016
The proposed merger between Dow Chemical Company and E. I DuPont De Nemours and Company, both of the US, would create the world’s largest integrated crop protection and seeds company. It would combine two competitors with leading herbicides and insecticides portfolios and with a strong track record of bringing innovative crop protection and seeds products to the market. It would also create a leading integrated producer of certain petrochemical products that are widely used in packaging and adhesive applications. The transaction would take place in industries that are already globally concentrated. The EC identified 3 major areas where there was significant overlapping of the activities of the 2 Companies and where there would be a substantial lessening of Competition if the merger went through, they being:
- crop protection- market for herbicides, insecticides, nemanticides and fungicides.
- Seeds, and
- Petrochemical products- Polyolefins and monomers.
The transaction which was notified to the EC on June 22, 2016 and considered by the EC and upon forming a prima facie opinion that post-merger, competition may be lessened, the EC initiated an in-depth Phase II merger investigation.
EC approves Konecranes’ acquisition of Terex’s crane and container handling unit dated August 8, 2016
Konecranes Plc (‘Konecranes’) is a global lifting equipment, headquartered in Finland and Terex Corporation (‘Terex’) and amongst other business supplies industrial cranes, crane components, crane services and container handling equipment. The proposed transaction envisaged bringing together Konecranes and Terex’s Material Handling & Port Solutions segment (MHPS) creating the world’s leading provider of hoists, industrial cranes and handling solutions.
The EC noted that the transaction would create significant overlaps between Konecranes’ and Terex’s activities in the supply of electric chain hoists and wire rope hoists, which are components used to build cranes, as well as standard cranes and container handling equipment. It was also observed that the transaction would have risked significantly reducing effective competition in the markets for electric chain hoists and wire rope hoists in the EEA, and in particular in Germany and France.
The concerns were based on the very large combined market shares of the merged entity, the intense competition between Konecranes and Terex’s MHPS products before the proposed transaction and the sole presence of Abus as the only other major alternative supplier active across the EEA. Moreover, customers raised concerns about the risk of price increases for both electric chain hoists and wire rope hoists in the EEA, and in particular in Germany and France.
In order to address the EC’s concerns, Konecranes offered to divest its entire global business for hoists, cranes and other handling materials, including the associated production facility based in Germany.
This divestment removes the whole overlap in Germany and more than half of the overlap in France for both electric chain hoists and wire rope hoists. At EEA level, the divestment removes completely the overlap for wire rope hoists and halves the overlap for electric chain hoists.
As a result of the commitments proposed by Konecranes, the EC observed that the competition in the markets for electric chain hoists and wire rope hoists at European and national level will be preserved.
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Doc ID: CL/15/16